5 Bonds Investment Strategies You Should Know Before Investing in Bonds

5 Bonds Investment Strategies You Should Know Before Investing in Bonds 

Investors need to do their homework before investing in bonds. Although the bond market is less risky when compared to the stock market, it’s always good to have a strategy. Having a plan helps you curtail risks and attain substantial profits. Before you purchase bonds, endure thorough research on their past performance, yield, and other benefits it brings to the table. Due to advancements in technology, now investors can buy bonds online too. Here, we give you five bond investment strategies that aid you in reaching your financial goals in the bond market and help you understand how to invest in bonds in India such as government bonds, zero coupon bonds, tax-free bonds, corporate bonds, PSU bonds, perpetual bonds etc.   

5 Bond Investment Strategies 

There are two types of investors in every market: passive and active investors. The former type are those who play safe by the rules and stick to basics, whereas the latter walk the extra mile to take additional risks. Now, regardless of the type of investor you are, strategy is very critical when it comes to investing your hard-earned cash. So without wasting any time, let us get started on a quick tour of five chosen bond investment strategies.  

Read also- Which bonds to buy to generate higher returns on your investments, Is now a good time to buy bonds online 

Bond Laddering Strategy:

This bonds investment strategies is for investors who love to invest identical amounts regularly. As the name suggests, you will get to invest in multiple bonds with similar expiry dates. Once the maturity date strikes, you can reinvest the withdrawn principal into a series of other bonds that have long expiration dates. The motto of bond laddering is to spread the risk and enhance your portfolio. Eventually, you’ll get a consistent inflow of income, followed by the facility to reinvest.   

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Indexing Bond Strategy:

This bonds investment strategy is the same as the index funds, and the structure is quasi cum passive by nature. The end motto of this strategy is to deliver matching returns that of an index. The indexing bond strategy is a blend of passiveness and buy-and-hold attributes. Investors attain gains by matching and replicating the outcome of the specifically chosen index. Since it is passive investing, you don’t need to pay higher costs. A nominal fee would do the trick for you.  

See- What are G-secs and how they are issued, Things to know about Market Linked Debentures, Top 5 safe investments with stable returns in India 

Bond Swapping Strategy:

If you are a pro in the bond market, then bond swapping would be a cakewalk for you. In other words, you can buy a nosediving bond and sell a surging price bond. While you may end up losing a few moolahs, you’ll be benefitting potentially at the end. The best part about this strategy is you can buy bonds online right after the swap.  

Read also- Top 5 safe investments with stable returns in India and Is now a good time to buy bonds online, how to buy zero coupon bonds, government bonds in india, covered bonds india, corporate bonds, tax free bonds

Reinvesting Interest Strategy:

As you know, bonds give you interest at regular intervals. The coupon you receive can either be treated as an income or reinvested in another bond to attain additional returns. Here, you take the extra risk of reinvesting your earned interest into a new bond. You can also put these gains in the debt market and diversify your portfolio. The safest thing to do is open a savings account to accumulate your coupon earnings at one standard place. This reinvesting interest strategy is an opportunity for investors who want to expand their investment options.  

Know also- how to buy bonds online, government bonds india, how to invest in zero coupon bonds online, what are tax-free bonds , Which bonds to buy to generate higher returns on your investments 
 

Barbell Strategy:

This strategy eliminates all the middle channels and trajectories and only focuses on extreme ends, i.e., high and low. Investors can strike an equilibrium by investing their money in short-term and long-term bonds in India. One can create myriad possibilities by using a barbell strategy.

Check – Things to know about Market Linked Debentures, Which bonds to buy to generate higher returns on your investments 

For instance, speculative stocks contain high risks and huge rewards, whereas bonds have fewer risks. So, an enthusiastic investor in their 20s might splurge 70% of his savings into speculative stocks and 30% into bonds. If that person is close to retirement, they prefer to spend 85% of their savings on bonds and 15% on risky stocks. In one way or the other, the end game of this strategy is to create a balanced portfolio.  

Check also- Tax free bonds for Senior Citizens and what are tax saving bonds , how to invest in fixed income securities, how to buy bonds in secondary market in india 

Conclusion 

It’s always nice to have a plan before entering the bond market. If you are a beginner, you have a long way to go, but if you are a professional in this field, a good strategy will result in decent returns. If you want to buy bonds online, BondsIndia has covered everything you want. From corporate bonds to tax-free bonds, you are just three steps away to purchase bonds on this leading digital bonds platform. For bond market news, upcoming IPOs, and other details, click here to know more.  

Know also- how to buy zero coupon bonds, government bonds in india, covered bonds india, corporate bonds, tax free bonds, g-sec strips, how to buy beneficial early retirement pension plans online, how to invest in fixed income securities, how to buy bonds in secondary market in india